What is Economics?
"There is only one social science and we are its practitioners” - George Stigler
Economics is such a broad subject, it is nearly impossible to define. Most definitions in Economics textbooks focus on making choices under scarcity. That describes some classical Economics and behavioral Economics. Economists don't really pay much attention what choices people make under scarcity, we usually just assume they act rationally to the best of their ability. Behavioral Economics is the only field that really takes choice making under scarcity seriously. Hayek said that "the curious task of Economics is to demonstrate to men how little they really know about what they imagine they can design". In other words, economists should prevent policymakers from implementing unrealistic policies. But what of all the economists that use their training to advocate more or better government programs? Or use their training to explain the world rather than to offer prescriptions? According to Henry Hazlitt, "The art of Economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups." For Hazlitt, Economics was simply a way of thinking that careful considered all of the costs and benefits, not just the immediate ones. While that is a useful skill, it is but one of many that economists should master.
Each of these definitions describes an important part of how economists think and what they do, but they fail to capture fully the nature of the economic enterprise. To me, Economics is about story telling. There is a pretty large collection of stories that economists tell one another, and we use empirical data to support which story fits reality the closest. Supply and demand is a metaphor/simile. The market for apples is like two lines on a chalkboard. OASHA is like tipped waitresses. Operas are to Youtube what Scotch whiskey is to beer in Iran. The economy is like an engine. Jobs are like relationships. Each story has facts to support it, sure, but they are all narratives that aren't quite reality. Reality has no narrative, but the human mind strives to impose one anyway. When listening to any economic explanation, ask yourself is this plausible?, parsimonious?, does it explain the patterns observed? Human credibility is the ultimate test of any economic theory.
Economics is such a broad subject, it is nearly impossible to define. Most definitions in Economics textbooks focus on making choices under scarcity. That describes some classical Economics and behavioral Economics. Economists don't really pay much attention what choices people make under scarcity, we usually just assume they act rationally to the best of their ability. Behavioral Economics is the only field that really takes choice making under scarcity seriously. Hayek said that "the curious task of Economics is to demonstrate to men how little they really know about what they imagine they can design". In other words, economists should prevent policymakers from implementing unrealistic policies. But what of all the economists that use their training to advocate more or better government programs? Or use their training to explain the world rather than to offer prescriptions? According to Henry Hazlitt, "The art of Economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups." For Hazlitt, Economics was simply a way of thinking that careful considered all of the costs and benefits, not just the immediate ones. While that is a useful skill, it is but one of many that economists should master.
Each of these definitions describes an important part of how economists think and what they do, but they fail to capture fully the nature of the economic enterprise. To me, Economics is about story telling. There is a pretty large collection of stories that economists tell one another, and we use empirical data to support which story fits reality the closest. Supply and demand is a metaphor/simile. The market for apples is like two lines on a chalkboard. OASHA is like tipped waitresses. Operas are to Youtube what Scotch whiskey is to beer in Iran. The economy is like an engine. Jobs are like relationships. Each story has facts to support it, sure, but they are all narratives that aren't quite reality. Reality has no narrative, but the human mind strives to impose one anyway. When listening to any economic explanation, ask yourself is this plausible?, parsimonious?, does it explain the patterns observed? Human credibility is the ultimate test of any economic theory.